Pandemic affects tax revenue

10 May, 2020 - 00:05 0 Views
Pandemic affects tax revenue

The Sunday Mail

Golden Sibanda
Senior Business Reporter

The Covid-19-induced lockdown, which has been in force for the past six weeks, will likely take a heavy toll on second-quarter tax revenue, the Zimbabwe Revenue Authority (Zimra) has warned.

Government depends on taxes to fund critical activities, projects and obligations.

Zimra Commissioner-General Faith Mazani (pictured above) said the pandemic has depressed economic activity and profitability of most taxpayers.

“The lockdown obviously has a negative bearing on revenue. This is because the level of economic activity has gone down drastically,” she said.

“This affects cashflows, profitability and the ability of businesses to pay taxes. This affects both direct taxes (corporate tax, PAYE, presumptive tax) and indirect taxes (VAT, customs duty, excise duty).”

Over 270 000 people have succumbed to Covid-19 worldwide, while more than 3,8 million have been infected, according to the US-based Johns Hopkins University.

In Zimbabwe, the disease has claimed four people from the 34 that have been infected.

The country has been in lockdown since March 30, but the restrictions have been gradually relaxed as more sectors have been allowed to reopen.

Revenue collections were resilient in March, as they came in 20 percent above projections at $6,1 billion.

After accounting for $136,3 million worth of refunds, net tax revenue collections amounted to $5,9 billion, which represents 17,3 percent above the target.

The major contributors to March’s net revenue collections were company tax (24,8 percent), excise duty (16,4 percent), individuals (13,9 percent), value added tax on local sales (11,2 percent), VAT on imports (9,8 percent), and intermediate money transfer tax (9,2 percent).

It is believed that the trend in March cannot be used to forecast revenue collections going forward, as the lockdown only started during the last two days of the month.

Further, except customs and excise duties, most of the taxes due in March were for business transactions made in February when business activity was still operating normally.

Comm-Gen Mazani said while assessments to ascertain the exact impact of the pandemic on revenues and profits across sectors were still ongoing, the virus would most likely dampen expectations.

“We are still looking at all factors and the circumstances that various business sectors find themselves in, with the view of determining the extent to which the lockdown has and will reduce cashflows and profitability — which is the estimated base of the tax revenue we expect from them,” she said.

Zimra is presently receiving input from organisations such as the Confederation of Zimbabwe Industries, Zimbabwe National Chamber of Commerce, as well as hotel and tourism operators, among others.

The tax collection body is reportedly moving towards electronically or digitally-based tax services to improve efficiencies.

The new system does not require staff or taxpayers to physically interface in making or facilitating transactions.

Overall, Zimra’s first-quarter net revenue stood at $13,9 billion against a target of $12,6 billion,
representing positive variance of 10,4 percent, Zimra vice board chair Josephine Matambo said recently.

Major contributors to tax revenue during the quarter by tax head include PAYE 17 percent, excise duty (fuel, airtime, beer, wine and spirits, tobacco) 16 percent, company tax 14 percent, VAT on local tax 14 percent), IMTT 12 percent,  VAT on imported goods 11 percent and customs duty on imports 8 percent.

By sector, major contributors to tax are the financial and insurance industry (above $2 billion),  mining and quarrying, manufacturing, wholesale, retail and repair (above $1billion) and information communication technology, agriculture, forestry and fishing.

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